A group of prominent investors and New York City’s chief investment officer are urging Tesla shareholders to vote against the electric automaker’s proposed $56 billion pay package for CEO Elon Musk, as well as the re-election of two board members seen as too closely tied to the billionaire.
In an open letter released Monday, the investor group slammed Musk’s pay as “excessive” and said it lacks any meaningful incentive value given its sheer enormity. They argue Tesla’s board has failed in its duty to provide proper oversight and controls over Musk’s behavior and controversies.
“Shareholders should not pretend that this award has any kind of incentivizing effect — it does not,” the letter stated bluntly. “What it does have is an excessiveness problem, which has been glaringly apparent from the start.”
Among those signing the letter are major institutional investors like Amalgamated Bank, Danish pension fund AkademikerPension, Nordea Asset Management, United Church Funds, and New York City Comptroller Brad Lander, who oversees the city’s pension funds.
The massive pay package, originally approved in 2018, allowed Musk to purchase shares at a steep discount as certain ambitious financial and operational milestones were met over a 10-year period. Many of those tranches quickly vested as Tesla’s stock price and valuation skyrocketed.
However, the Delaware court ruling voided the plan in January, forcing Tesla to put it up for a new shareholder vote at the company’s June 13th annual meeting. The automaker has taken the highly unusual step of launching a website and promotional video actively urging shareholders to approve the contested pay plan.
In addition to Musk’s pay, investors are being asked to vote on Tesla reincorporating from Delaware to Texas, as well as the re-election of directors Kimbal Musk, Elon’s brother, and James Murdoch to the board.
The open letter from investors asserts that approving those two board members would reinforce a perceived “governance failure” at Tesla that allows Musk to act with impunity while tarnishing the company’s reputation.
“Over the past few years, Elon Musk has dominated the headlines with his public fights with regulators, acquisition of Twitter, controversial statements on X, and his legal and personal troubles,” the letter stated. “There are indications that the steady stream of negative Musk-related press coverage has led to a decline in the company’s reputation among consumers, which in turn is having a negative effect on Tesla’s bottom line.”
It cited Musk’s $44 billion acquisition of Twitter last year, his feuds with regulators like the SEC and FTC over his online posts, as well as his legal battles related to the Twitter deal and accusations of sexual misconduct as potential drags on Tesla’s brand and performance.
“Tesla is suffering from a material governance failure which requires our urgent attention and action,” the investors warned. Rejecting Musk’s pay plan and the two director re-elections is “critical” to reining in risks to the pioneering electric carmaker.
The letter represents the latest salvo in an escalating battle between Tesla’s leadership and a contingent of shareholders, advisory firms and governance experts alarmed by Musk’s $56 billion pay and his outsize control over the company he has taken from a niche startup to the world’s most valuable automaker.
In April, two major proxy advisory firms, Institutional Shareholder Services and Glass Lewis, both recommended investors vote against Musk’s pay, citing its “excessive” size and a lack of meaningful incentive or performance criteria.
Tesla has fired back at the criticisms, arguing Musk’s visionary leadership has created billions in shareholder value that more than justifies the richest pay deal ever struck between a public company and executive. It has touted benchmark-smashing revenue and earnings growth alongside ambitious new vehicle program launches.
With Tesla shares down around 30% year-to-date amid growing competition and economic headwinds, however, some shareholders seem increasingly concerned about Musk’s leadership distractions and divided attention from the core auto business. June’s pivotal vote could prove a referendum on those worries.